With the COVID-19 pandemic grabbing most headlines the past few weeks, the cryptosphere has been directing some of its attention toward Bitcoin’s reward halving. With the event just four weeks away and the Bitcoin Cash and Bitcoin SV halvings already executed, the anticipation for Bitcoin’s halving is at an all-time high.
“Bitcoin halving” interest rising over time. Source: Google Search Trends
The halving grants Bitcoin (BTC) one of its most important features — its deflationary status. Bitcoin started out with 50 BTCs being created with each block, which took approximately 10 minutes to mine, but this rate is subsequently cut in half every four years. The upcoming halving will be the third of its kind and will reduce the Bitcoin issuance rate to 6.5 BTC for every 10 minutes of mining.
The halving is a highly anticipated event for industry insiders, with many having a bullish outlook for the price after the issuance is reduced. Production is cut in half, and many expect the demand to stay the same or to increase, which means the price would be bound to increase according to the laws of supply and demand.
However, the price doesn’t always do what’s expected, and it is possible that Bitcoin’s price will remain the same, or even drop after the halving. There are a lot of pieces affecting the price, including trader speculation. Margin trading in futures, for example, has been known to be a driving force in the price of Bitcoin when volatility ensues, which was visible during the crash of March 12–13 that led many leveraged positions to be liquidated. The current correlation with the stock market is another example of how Bitcoin’s price does not conform to the rationale of supply and demand.
Miners also affect the price
While speculation is certainly a driving factor for Bitcoin’s volatility, miners are also an important factor, accounting for a large percentage of sell pressure in BTC since they actually need to liquidate their mined coins in…